GBP

A fairly uneventful day for sterling yesterday as the U.K storm meant volumes were half that of a normal day, with many FX desks running skeleton crews. Sterling dipped against both the euro and dollar yesterday following a drop in retail sales in October and a BOE policymaker stating that rate hikes prior to a significant fall in jobless data would damage the economy.

Retail sales slumped in October from September 15-month high. This was considerably weaker than forecasted. Naturally, this produced some whispers of a possible slowdown in the U.K economy, however these were widely dismissed as nonsensical and the market is not fussed about this drop. Equally, every retail business surveyed expects next month to be far better. Also with the grinch of the recession gone, overall many are expecting this to be the best year in a long time for Q4 retail sales.

In other news the P.M has released a visionary plan and with a little wizardry will make the U.K the first Western government to issue an Islamic bond. This is intended to tempt Islamic investors into the U.K market. Data releases of note today include consumer credit, money supply mom and mortgage approvals.

EUR

With no data out of the eurozone yesterdays trading was fueled by market sentiment and data emerging from the UK and the US. A dip in UK retail sales failed to make any real impact on sterling. A slowdown in U.S home sales also failed to stop a dollar stealth rally as is recovers from the trauma of its recent lows.

The euro dipped against both sterling and the dollar. However, the dip was minimal and it can retrace to past highs if recent data releases beat expectations. It is still within jumping distance of last weeks 2-year high against the dollar and last weeks month high against sterling.

Data of note out of the eurozone today includes French consumer confidence, Spanish retail sales and Greek producer price index. With France being the seconded strongest economy in the eurozone this is a significant release to demonstrate their growth and will allow the market to plot probable Q4 growth figures for France. Conversely, with Greece and Spain being weaker economies the market will be keen to see a continuation in the recovery. Sentiment towards the weaker nations is good, interestingly the Spanish government can now borrow at the cheapest rates since before the crisis.

USD

The dollar punched back against last weeks lows and experienced some much needed gains against both sterling and the euro.This resulted due to the growing expectation that any alteration to QE is unlikely for Q4. General consensus is next March.

Yesterday saw the release of Industrial production and pending home sale figures. Industrial production rose 0.6%, Manufacturing rose 0.1% and Pending home sales plunged 5.6% completing the reversal of all of this years’ gains and signalling a sharp drop in existing home sales.

The capital goods production soaring last month rescued the third quarter. The implied increased production is encouraging for wider consumer sentiment, especially during the build up to thanksgiving which is when U.S spending hits its highest levels. Conversely weak headline retail sales are expected for September today, however levels did look strong pre-shutdown.